Turk Procurement Chief Signals Overhauling of Offset Deals

Jun. 6, 2014 - 03:45AM
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Ismail Demir (THY Teknik)

ANKARA — Turkey’s newly appointed procurement chief has signaled that the country’s offset system, which has often unnerved foreign contractors, might be rethought.

“Even the mention of the word ‘offset’ annoys foreign companies. We should perhaps design contracts [with foreign contenders] based on different solutions instead of offsets,” said Ismail Demir, who was named last month as the new head of Turkey’s procurement agency, the Undersecretariat for Defense Industries (SSM).

Foreign companies have welcomed the proposal.

“He is right. Even the mention of the word offset is irritating,” said one Western company executive here. “I think the concept has long gone out of its intended purpose and scope. It practically means extra burden on foreign companies.”

An offset is a type of compensation made by a company to a foreign country in exchange for that country’s purchase of the company’s defense goods and services. It can take the form of a contract awarded to a company in the customer country.

Another Western company official said that Demir’s message looked truly “business friendly.”

“Despite a few [days] into the job, we are glad that he is aware of a fundamental problem obscuring the business climate in Turkey,” he said.

In his speech at a May 27 panel discussion, Demir said that foreign companies often find it difficult to fulfill their offset commitments to Turkey.

“Unfortunately, it is not a rare practice that when fulfilling their offset commitments foreign companies must sign up to businesses with extremely low value-added or even tend to inflate figures,” Demir complained.

An SSM official confirmed that the procurement chief could reshuffle the offset system as he further warms up to his new job.

Before taking over as Turkey’s chief procurement official, Demir, a professor of aviation, was the chief executive official of THY Teknik, the repair and maintenance subsidiary of Turkey’s national carrier Turkish Airlines. ■